Bemco Hydraulics Project at Belgaum

Bemco Hydraulics Ltd.
,Belgaum
CHAPTER I
EXECUTIVE SUMMARY
This project on A STUDY OF WORKING CAPITAL MANAGEMENT AT BEMCO
HYDRAULICS LTD, BELGAUM deals to ascertain the efficiency of working capital
management of the company.
In this project my aim is to know the principle adopted by the company to handle its
working capital & the aim is to study working capital management of Bemco.
Working capital may be regarded as lifeblood of business.Working capital is needed to meet
day-to-day requirement of the business unit.The exploitation of working capital assets is possible
only by efficient working capital management.This study on working capital management is
conducted in Bemco Hydraulics Ltd.
This study focused on the cost of working capital of the organization and also towards some
ratios relating to the working capital of the company.
Type of data collection involved primary data and secondary data for this study.The most of
the required information was collected through secondary sources.
Secondary data were collected from various sources including the annual reports of the
company for the year 2009-10, 2010-11, 2011-12 and 2012-13.
Ratio analysis is the major tool for analyzing the working capital management of Bemco and
also the information for 5 years is collected.
Ratio analysis has been carried out using Financial Information for last five accounting years
i.e. from 2009 to 2013 Ratio have been analyzed.
I hope that the study has fulfilled all its objectives and will b useful for those who are using
this project report in the future.
PROJECT TITLE
A Study on Working Capital Management at Bemco Hydraulics Limited, Belgaum.
A.S.S College Of Business Administration,Gadag
Page 1
Bemco Hydraulics Ltd.,Belgaum
NEED FOR THE STUDY

The project work is made compulsory by Karnataka University Dharwad for the BBA
students for the fulfillment of the requirement of BBA degree as part of our curriculum.
Bemco Hydraulics Ltd., Belgaum also informed me to do project on Working Capital.
And also to get the practical knowledge about the industry on Working Capital management
carried in the organization.
OBJECTIVES OF THE STUDY

This study is being conducted with the following objectives
1. To know the sources for financing working capital

2. To know the working capital requirement of the company
3. To know the principle adopted by the company to manage the working capital
4. To know whether the working capital management position is sound in the company
SCOPE OF THE STUDY

Working capital management being a very important concept in all the companies having
a void coverage often calls for the managerial attention. In the modern times working capital
management has become the integral part of the all companies. So all the firms give special
importance for working capital management. The major objective of the study is to examine the
effectiveness of working capital management system adopted by an industry; the study mainly
focuses on the techniques used by the company to control the working capital.
METHODOLOGY
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The methodology adopted is as follows
SOURCES OF DATA
1. PRIMARY DATA:
Collection of information or data is done through interview method with senior Accountant,
Mr. Rajshekhar Lakkashetti
2. SECONDARY DATA:
Most of the information is collected from secondary data. It is the data that already exist. The
sources of secondary data are:
Balance Sheet of the company

P & L account of the company
Text books
Company website
FINDINGS
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1. Company has adopted the aggressive principle to maintain the working capital.
2. The main and only source for financing working capital is Bank Loan.
3. Bank of Maharashtra and SBI are the banks which provides loan to the company.
4. Though current ratio is not upto the mark, but in five years it never went less than 1.17
which can be considered as good.
5. There is increase in profit and sales
6. Company is growing step by step.
7. By studying the financial growth statements I found that the companys financial position
will be sound in the coming years.
SUGGESTIONS
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1. It is good for the company to move with aggressive principle only, because it is suitable
and benefited to the company.
2. In addition to Bank loan I would like to suggest the following internal sources of
finance for the working capital, because it will result in reduction of cost of working capital that
is 2,51,53,063.28 for past five years.
Cash in hand
Debtors
3. Company prefers Bank of Maharashtra and SBI for loan, they can go for other banks
also which will provide loan at less interest.
4. I would also like to suggest company to improve its working capital position by
reducing its current liabilities like paying the creditors as early as possible.
5. Since company is growing I would like to suggest that it can open its branches in other
cities also that it can spread its operations which will help the company to achieve its vision.
6. Investment in current assets should be increased.
LIMITATIONS OF THE STUDY
The analysis is based on the data collected from the past five years financial reports.
The time allotted to undergo was less to study all the aspects.
Non availability of statement like cost sheet, budget statement became problem to
study in detail.
The study depends more on secondary data
CHAPTER II
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INDUSTRY PROFILE
The Indian Hydraulic Industry was started in early 60s primarily with an objective
of import substitution of some of the hydraulic products being used in various applications.
Since most of the Indian industries have been set up based upon the variety of technological
sources, the range of their specifications is very wide.Due to this range of products in the oil
hydraulic is also quite wide resulting in very small batch for each product.
It is therefore, difficult to specify a minimum economically viable capacity for the
industry. While there has been a continued overall growth in the oil hydraulic products business
due to large variety of specialized products to meet specific individual applications, volume
growth in individual products has been very low. With low volumes and high development costs
concerning tooling, casting and forging, the industry has not been able to adopt modern
production methods. Current production technologies in use are largely dictated by production of
large volumes, quality requirements and costs.
Since the Indian industries have to manufacture a large variety of products with
low volumes, the industry is not able to use the modern high production lines. Most of the
manufacturers, with exception to some(who have installed dedicated SPMs and CNC)machines
with special toolings and some special purpose machines for specialized metal cutting
operations.
Although the industry has shown a reasonable growth over the years, but it is far
away from the volumes which would lead to adopting modern production methods.Also the
limited demand is being shared by over 20 firms resulting in uneconomical volumes for most of
them. It is unlikely that the situation would change drastically in the coming decade due to
various factors mentioned above.
Almost all the major manufacturers of hydraulic equipments have collaboration
with foreign companies. Only two companies viz. Polyhydrons are Oscar Equipments are
manufacturing products based on indigenous development.There has been very little attempt at
developing indigenous technology for these products, although barring few items, all other
equipments have been indigenized.
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CHAPTER III
COMPANY PROFILE
Name of the company
:Bemco Hydraulics Limited Belgaum
Registered Office
:Udyambag,Khanapur Road,Blgaum-590008
Size and Nature of the
:Medium scale,Public Limited company
Company
Total area
:30000 sq.mts.
Total area build-up
:10000 sq.mts.
Phone Number
:+91-831-4219000
Fax Number
:+91-831-2441263
Email
:finance@bemcohydraulics.net
Web site
: www.bemcohydraulics.net
Date of Incorporation
: Originally incorporated on 04/03/1957 as Private Limited and
subsequently incorporated on 19 /04/1972 as Public Ltd

Registration number
: Registered with DGTD on 15/12/1973
Registration No
: 1283
ISO
: 9001:2008
Activity
: Manufacturing and selling of Hydraulic Presses and equipments
Company Secretary
: Mr.S.R.Deshpande (LLB,FCS)
Export to countries
: Ethiopia,Iraq,Israel,Malaysia,Myanmar,Nepal,Oman,Philippines,
Russia,Saudi Arabia,Srilanka,Singapore,Tanzania and Zambia.
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BACKGROUND AND INCEPTION OF THE COMPANY
First Hydraulic Press Ever Developed in 1957;

Bemco is the first company in India to produce hydraulic presses.
Bemco originally was an engineering craftsmans shop in the late 30s has risen to be
primer producer of Hydraulic presses and equipments. Bemco Hydraulics company
started manufacturing presses initially in collaboration with VOGAL & COM
GERMANY ,in the year 1956-57 and subsequently developed innumerable types of
standard & non-standard range of hydraulic presses and special purpose hydraulic
pneumatic machines.
It started in 1956 with group of people like Late Shri Baburao Pusalkar and some other
members.
The company started initially with 25 people with Rs.10000 turnover.
BEMCO stands for
B-Belgaum
E-Engineering
M-Motors
CO-Company
MAJOR CHANGE
Every company after 6 years and within 10 years suffers from recession.
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And so happened with Bemco,during 1970s the company became weak in finance
and Mr.M Mohta who purchased the maximum shares of Bemco became the
chairman of the company.
During 1975 the strength of the company almost reached to 450 employed with a
turnover of 5 crores.
By now the major item produced by the company changed from motors to hydraulic
line process in large scale.
The company became pioneer in India in making various types of hydraulic process
as per the need of customers.
NATURE OF BUSINESS CARRIED

The company is engaged in manufacturing:
Throat type hydraulic presses.

Four pillar hydraulic presses.
Closed fame hydraulic presses.
Power compacting presses.
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Mounding, Straightening and bending presses.

Scrap balling presses.
Deep drawing, trimming, forging, crankshaft twisting and coining presses.
Railway wheel fitting, spring bucking, axle fitting, different spotting and quenching
presses.
Stabilizer bar correction presses.
Broaching for horizontal and vertical machines.
All types of special purpose oil hydraulic machines.
Hydraulic power packs.
Hydraulic cylinders.
Hydraulic pumps and valves.
Hydraulic motors.
During the year 2004-05 the company made re-railing equipment first time in India
and supplied to Indian Railways.
VISION,MISSION AND QUALITY POLICY

VISION
The vision of Bemco is to be highly visible company known for its highest technology
driven products, superior trimming and surpassed service in the engineering field, out products
will be marked worldwide and will be looked at as leader in customer made machines, Bemco
will market the world class prestigious products through best distribution network.
MISSION STATEMENT
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Our mission is to provide innovative, practical and world class quality product that
improves the workman to perform their job. We believe that our first responsibility to our
customer who use our products.
QUALITY POLICY
We are a growth oriented organization in terms of technology, quality and quantity
whose underlying principle is timely delivery of long term, cost effective products and services
to our customers.
OBJECTIVES
To offer flawless services to customers.
To offer support in:
1.Selection of machinery
2.Design and development
3.Installation and commission
4.Supply of components and sears
5.Promote after sales services
To provide wide range of presses for various applications in metal working, plastic,
wood working, rubber electronic industries.
PRODUCT PROFILE
The company is engaged in manufacturing Hydraulic Pumps, Valves, Straightening
Presses, Steel Metal Forming Presses, Horizontal Boring Machines, Throat Type Hydraulic
Presses, Four pillars hydraulic presses etc. Apart from the standard range Hyloc supplies large
number of special fittings and also develops fittings for specific needs.
VALVES
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The designs are carried out using exclusive specialist manifold software programs used,
constantly updated and enhanced over the last 5 years. These programs run on 3D solid modeling
CAD software.
STRAIGHTENING PRESSES
These are hand operated open throat presses with bar straightening attachment for
straightening cam shafts, axle shafts and crank shafts
Presses from 63 KN to 2000 KN capacity and straightening attachment for bar length 100
mm to 5000 mm can be supplied.
SHEET METAL FORMING PRESSES

Deep drawing presses are for sheet metal forming like LPG, bottles, automobiles sheet
metal parts, Domestic appliances etc. These metals come in four pillar closed frame and
stretched rod type construction with die cushion/blank holder for bank holdings. Press
capabilities of 2000 tonnes and table sizes of 4000 mm x 4000 mm are already built and even
larger presses can be built.
AREA OF OPERATION
Bemco is an authorized and certified supplier for:
AUTOMOBILE INDUSTRIES
Hyundai Motors Ltd.
Maruti Udyog Ltd.
Tata Motors Ltd.
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TVS Motors Ltd.

Hero Honda Motors Ltd.
Bajaj Auto Ltd.
Honda Motors Pvt Ltd.
HEAVY ENGINEERING & ELECTRICALS
Bharat Heavy Electrical Ltd
Hindustan Aeronautics Ltd

L & T Ltd
Bharat Forge Ltd
INDIAN RAILWAYS
All Zonal Works Shop
ART
HRD
SPACE
Indian space research organization Trivandram
R & D Engg Organization Pune
Vikram Sarabhai Space Research center.
With its registered office/Head office at
Udyambag Belgaum-590008
Karnataka.
finance@bemcohydraulics.net
www.bemcohydraulics.net
Regional offices/Branches at
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New Delhi
907,Padma Towers I,
Rajendra palace,
New Delhi-110008.
newdelhi@bemcohydraulics.net
Kolkata
Dakshini Para Road,
P.O.Tharurpukr,
Kolkata-700063.
Kolkata@bemcohydraulics.net
Chennai
Flat 3E,J.P.Tower,
Nungambakkam High Road,Chennai-600034.
Chennai@bemcohydraulics.net
BEMCO PRODUCTS ARE EXPORTED TO
Ethiopia
Iraq
Israel
Malaysia
Nepal
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Oman
Philippines
Russia
Saudi Arabia
Srilanka
Singapore
Zambia
From the following information imparted regarding the Area of Operation it is clear that
Bemco Hydraulics Ltd supply its products to various regional industries with three branches in
the prominent places in India and also export to many countries in the glob that is the supply of
products to the International customers. Hence from this study we say that Bemcos area of
operation is regional as well as globe in nature.
Bemco Private Ltd has successfully carried out its business with the immense support of their
financers and bankers.Those are:
1. Bank of Maharashtra, Main Branch, Kirloskar, Belgaum.

2. State Bank of India, Commercial Branch, Belgaum.
OWNERSHIP PATTERN
The company was incorporated in the state of Karnataka on 14 th March 1957 as New
Bemco Engineering Products Private Limited by Mr.Vishnu Nimbakar, Mr. B. V. Pusalkar and
Mr. M. B. Jambeau. The name of the company was changed to NEW BEMCO ENGINEERING
PRODUCTS LIMITED on 19th April 1972. In the year 1974,the company was taken over by the
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present promoters, the Mohta group. Mr. M. M. Mohta is the present Chairman and Managing
Director of the company.
The name of the company was further changed to BEMCO HYDRAULICS
LIMITED,on 6th December 1976.In the year 1986, the company made its initial public offer and
its equity shares were listed on the Stock Exchange.
In the year 1991 he took the charge of the company as the Chairman and Managing
Director.
In the year 1992 Mrs. Urmila Devi Mohta was appointed as a Non Executive Director.
In the year 1994 Mr.Anirudh Mohta,the son of M. M. Mohta was appointed as the Joint
Managing Director of the company.
In the year 1998 Shri R. M. Shah and Shri N. K. Daga were appointed as independent
Directors of the company.
In the recent year 2004 Shri. Dilip Chandak has also been appointed as an independent
Director of the company.
COMPETITORS INFORMATION
The company has competition from the unorganized sector consisting of a number of
small players who supply to the automobile industries. Over the years of existence, the company
has been able to develop a satisfied customer base both in India and Abroad and in the coming
year moving towards standardization of its products.
Some of the major competitors of Bemco Hydraulics Private Limited in Belgaum are:
Siddhartha Industries
Hydro pack private ltd
S.P.M Control
Plus one Hydraulics
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Some major competitors of BEMCO Hydraulics Ltd in India are:
Iszac,Pune
HMT
Electro Pneumatic
INFRASTRUCTURAL FACILITIES
Power
The peak hour requirement of power to the company is 250 KVA. The company presently has
arrangements with HESCOM for supply of 250 KVA or more, if required. The company also has
three DG sets with the capacity of 125 KVA each as stand by arrangements.
Manpower
The company has total of 287 employees out of which,224 employees are permanent, 10
employees are on contract and 53 employees are working apprentices. Both skilled and unskilled
manpower is available locally.
Raw materials and consumables
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The main raw materials for the company is steel, which is procured by the company from the
large suppliers like SAIL and also from local vendors. The main varieties of steel consumed by
the plant Plates, Bars, Rounds, Pipes etc.
The company also requires hydraulics pumps, electric motors, PLC & welding wires, which
are being procured from Siemens, Bosch & other vendors.
The consumables such as oil, electrical parts and other store items are available in
abundance locally.
Canteen
The canteen facilities are provided for the employees. Through canteen, snacks and tea is
served to the employees at the workshop and to the staff. It will be supplied to the workshop
workers at 8.30 am and other staff after 9.15 am.
Afternoon tea will be supplied at 2 pm to the workers and to the staff at 2.30 pm. The
company is giving snacks and tea almost at free of cost (per head at 0.40 paisa).The canteen runs
under the subsidies rates.
ACHIEVEMENTS
1.Bemco has achieved extensive success as a remark of which it celebrated the 50th
Excellence Golden Jubilee in the year 2007.
2.It has achieved a outstanding turnover from 1 crore to 20 crores.
3.Bemco got ISO certificate during the year 2009-10.
FUTURE GROWTH AND PROSPECTS

The Hydraulic Presses manufactured by the company are primarily used in the Automobile
sector. On the canvas of Indian economy, Auto Industry occupies a prominent place. Due to its
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deep forward linkages with several key segments of the economy, automotive industry has a
strong multiplier effect and is capable of being the driver of economic growth. The automotive
sector is one of the core industries of the Indian economy, whose prospect is reflective of the
economic resilience of the country. With 4% contribution to the GDP and nearly 5% of the total
industrial output, the automotive sector has become a significant contributor to the exchequer.
Technical collaboration with PINETTE EMIDCAU INDUSTRIES
Bemco has entered into a technical collaboration with PINETTE EMIDCAU
INDUSTRIES OF FRANCE FOR MANUFACTURE of SMC Moulding Machines of high
ranges. This would help the company in adding new customers and industries in its portfolio.
Collaboration with DUNKS COMPANY,GERMANY:
Bemco has entered into collaboration with DUNKS COMPANY for fitting press for
INDIAN RAILWAYS and many other which signifies growth of Bemco.
Collaboration with SECOND MONA,ITALIAN COMPANY:
This collaboration rates to HCL products. Bemcos target is to standardize product with
technology with outstanding products other than common. In terms of finance 30% growth is the
target of Bemco.
PRODUCT CAPACITY AND PRODUCTION
PRODUCT
UNIT
INSTALLED
CAPACITY
1000(1000)
PRODUCTION
Hydraulic presses
Nos.
Axial piston pumps
Nos.
300(300)
86(89)
Hydraulic equipment
Nos.
800(800)
604(529)
Hydraulic jacks
Nos.
100(100)
NIL(NIL)
59(79)
SPECIAL FEATURES OF THE BANK

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1. Bank of Maharashtra, Main Branch at Kirloskar Road, Belgaum and SBI, Commercial Branch,
Belgaum are the only banks which are proving loan to the company.
2.Company prefers Bank of Maharashtra and SBI because they give loan at less interest.
3.Relationship between the company and both the banks is good since both the banks are
providing loans to the company from many years.
SWOT Analysis of the company

Strength
1.Large number of orders.
2.High quality.
3.One of the top five jobbing foundries in India.
4.Efficient manpower.
5.Good infrastructure facility.
6.Good financial condition.
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7.Various awards and achievements.
Weakness
1.High transportation cost.
2.High rejection.
3.High absenteeism of workers.
Opportunities
1.Increase in demand order.
2.Permanent and new customers.
3.Increase in production capacity.
4.Advancement in technology.
5.Qualified employees.
Threats
1.Environmental problems.
2.Environmental policy.
3.Competition.
LEARNING EXPERIENCE
My learning experience during the project was very good
1. First thing I came to know is importance of time management.
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2. In Bemco I got the opportunity to meet the C.As while they are auditing the financial
statements of the company, they were speaking to each other that at least they need three
seconds to check one page, that time I came to know we have to develop doing things
very quickly.
3. This project helped me in knowing the importance of group efforts when compared to the
individual efforts.
4. I also came to know how work and things are getting done through others and with
others.
5. I got the opportunity to meet the H. R. Manager Mr. Mundri from whom I came to know
the importance of good human relationship in the company.
So totally my experience during the project was very nice.
WORKING CAPITAL MANAGEMENT

1. Introduction
2. Need of Working Capital
3. Gross Working Capital and Net Working Capital
4. Types of Working Capital
5. Determinants of Working Capital
6. Importance of Working Capital
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CHAPTER IV
THEORETICAL FRAMEWORK
INTRODUCTION
Working Capital Management
Working capital management is concerned with the problems which arise in attempting
to manage the current assets,the current liabilities and the interrelationship that exist between
them.The term current assets refers to those assets which in ordinary course of business can be or
will be turned into cash within one year without undergoing a diminution in value and without
disrupting the operation of th firm.The major current assets are cash,marketable
securities,account receivale and inventory.Current liabilities were those liabilities which intend at
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their inception to be paid in ordinary course of business,within a year,out of the current assets or
earnings of the concern.The basic current liabilities are account payable,bill payable,bank overdraft and outstanding expenses.
The goal of working capital managemwnt is to manage the firms current assets and
current liabilities in such a way that the satisfactor level of working capital is mentioned.The
current assets should be large eneogh to cover its current liabilities in order to ensure a
reasonable margin of safety.
DEFINITION
According to Guttmann & DougallExcess of Current Assets over Current Liabilities.
According to Park & GladsonThe excess of current assets of business (i.e. cash,accounts recivable,inventories)
over current items owned to employess and others ( such as salaries & wages,account
payable,taxes owned government).
NEED OF WORKING CAPITAL MANAGEMENT
The need of working capital gross or current assets cannot be over emphasized.As
already observed,the objective of financial decision making is to maximize the shareholders
wealth.To achieve this,it is necessary to generate sufficient profits can be earned will naturally
depend upon the magnitude of the sales among other things but sales cannot convert into
cash.There is need for working capital in the form of current assets to deal with the problem of
arising out of lack of immediate realization of cash against goods sold.Therefore sufficient
working capital is necessary to sales activity.Technically this refers to cash or operating cycle.If
the company has certain amount of cash it will be required for purchasing the raw material may
be available in credit basis.Then the company has to spend some amount for labour and factory
overhead to convert raw material into work in progress, and ultimately finished goods.These
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finished goods convert into sales on credit basis in the form of sundry debtors.Sundry debtors are
converting into cash after expiry of credit period.Thus some amountof cash is blocked into raw
materials,WIP,finished goods,sundry debtors and day to day cash requirements.However some
part of current assets may be financed by current liabilities also.The amount required to be
invested in this current assets is always higher than the funds available from current
liabilities.This is the precise reason why the needs of working capital arise.
GROSS WORKING CAPITAL AND NET WORKING CAPITAL

There are two concepts of working capital management.
1. Gross Working Capital
2. Net Working Capital
1. GROSS WORKING CAPITAL

Gross working capital refers to the firms investment in current assets.Current
assets are the assets which can be converted into cash within a year include cash,short term
securities,debtors,bills receivable and inventory.
2. NET WORKING CAPITAL

Net working capital refers to the difference between current assets and curent
liabilities.Current liabilities are those claims of outsiders which are expected to mature for
payement within an accounting year and include creditors,bills payable and outstanding
expenses.Net working capital can be positive or negative.
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Efficient working capital management requires that firms should operate with
some amount of working capital,the exact amount varying from firm to firm depending among
other things on th nature of industries.Net working capital is necessary because the cash outflows
and inflows do not coincide.The cash outflows resulting from payment of current liabilities are
relatively predictable.The cash inflow are however difficult to predict.The more predictable the
cash inflows are,the less net working capital will be required.
The concept of working capital was first eveolved by Karl Marx.Marx used the
term variable capital means outlays for payolls advanced to workers before the completion of
work.He compares this with constant capital which according to him is nothing but dead
labor.This variable capital is nothing but wage fund which remains blocked in terms of
financial management; work in process along with other operating.
An expense until it is released through sale of finished goods.Although Marx did
not mentioned that workers also gave credit to the firm by accepting periodical payment of
wages which funded apportioned of WIP,the concept of working capital,as we understand today
was embedded in his variable capital.
TYPES OF WORKING CAPITAL

The operating cycle creates the need for current assets ( working capital).However
the need does not come to an end after the cycle is completed.To explain this continuing need of
current assets a distinction should be drawn between permanent and temporary working capital.
1.PERMANENT WORKING CAPITAL

The need for current assets arises,as already observed,because of cash cycle.To
carry on business,certain minimum level of working capital is necessary on continuous and
uninterrupted basis.For all practical purpose,this requirement will have to be met permanent as
with other fixed assets.This requirement refers to as permanent or fixed working capital.
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2.TEMPORARY WORKING CAPITAL

Any amount over and above the permanent working capital is temporary,fluctuating or
variable working capital.This portion of the require working capital is needed to meet fluctuation
in demand consequent upon changes in production and sales as result of seasonal changes.
Temporary Working Capital
Amount Of
Working capital
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Permanent Working Capital
TIME
Graph shows the permanent level is fairly constant while temporary working capital is
fluctuating in the case of an expanding firm the permanent working capital line may not be
horizontal.
This may be because of changes in demand for permanent current assets might be
interesting to support a rising level of activity.
DETERMINANTS OF WORKING CAPITAL
The amount of working capital depends upon the following factors
1. Nature of Business
Some businesses are such, due to their very nature, that their requirement of fixed capital is
more rather than working capital. These businesses sell services and not the commodities and
that too on cash basis. As such, no funds are blocked in piling inventories and also no funds are
blocked in receivables E.g. Public utility services like railways, infrastructure oriented projects
etc. their working capital requirements less. On the other hand, there are some businesses like
trading activity, where requirement of fixed capital is less but more money is blocked in
inventories and debtors.
2. Length of Production Cycle
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In some business like machine tools industry, the time gap between the acquisition of raw
materials till end of final production of finished products itself is quite high. As such amount
may be blocked by either in raw material or work in progress or finished goods or even in
debtors. Naturally the need of working capital is high.
3. Size and Growth of Business
In very small company the working capital requirement is quite high due to high overhead,
higher buying and selling cost etc. as such medium size business positively has edge over the
small companies. But if the business starts growing after certain limit, the working capital
requirements may adversely affect by their increasing size.
4. Business/Trade Cycle
If the company is operating in time of boom, the working capital requirement may be more as
the company may like to buy more raw materials, may increase the production and sales to take
the benefit of favorable market, due to increase in sales, there may be more and more amounts of
funds blocked in stock and debtors etc. Similarly in the case of depressions also, working capital
may be high as the sales terms of value and quantity may be reducing, there may be unnecessary
piling up of stock without getting sold, the receivable may not be recovered in time etc.
5. Terms of Purchase and Sale

Some time due to competition or custom, it may be necessary for the company to extend more
credit to customers, as result in which more and more amount is locked up in debtors or bills
receivables which increase the working capital requirement. On the other hand, in the case of
purchase, if the credit is offered by suppliers of goods and services, a part of working capital
requirement will be higher.
6. Profitability
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The profitability of the business may vary in each and every individual case, which is in turn
depend on numerous factors, but high profitability will positively reduce the strain on working
capital requirement of the company, because the profits to the extent that they earned in cash
may be used to meet the working capital requirement of the company.
7. Operating Efficiency
If the business is carried out on more efficiently, it can operate in profits which may reduce
the strain on working capital it may ensure proper utilization of existing resources by eliminating
the waste and improved.
OBJECTIVES OF WORKING CAPITAL MANAGEMENT

1. To ensure adequate liquidity of firm
2. To minimize the risk
3. To maximize the firms value
IMPORTANCE OR SIGNIFICANCE OF WORKING CAPITAL

1. Feeling of security and confidence
2. Solvency and survival
3. Goodwill and borrowing capacity
4. Good relation with suppliers, bankers and creditors
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5. Research and innovation programs
6. High moral
7. Increased profitability
STATEMENT OF THE PROBLEM

Study and analysis of working capital at BEMCO Hydraulics Ltd.
CHAPTER V
ANALYSIS AND INTERPRETATION
ANALYSIS OF WORKING CAPITAL
Statement showing changes in working capital for the year 2009 & 2010
Page 31

Particulars
Current Assets:
Inventories
Years
2009
Change in working capital

2010
Increase
Decrease
12,32,21,007
16,73,78,152
Debtors
5,07,13,758
3,05,07,099
2,02,06,659
Cash & Bank
1,69,17,676
1,36,32,956
32,84,722
Loans & Advances
1,45,13,798
1,22,66,919
22,46,879
20,53,66,241
22,37,85,126
Liabilities
12,02,85,500
11,31,72,270
Provisions
55,83,967
57,07,608
12,58,69,467
11,88,79,878
7,94,96,774
10,49,05,248
Gross Working
Capital(A)
4,41,57,145
Current Liabilities:
(B)
Net Working Capital(AB)
71,13,230
1,23,641

Particulars
Years
Change in working capital
Page 32

Current Assets:
Inventories
2010
2011
Increase
16,73,78,152
19,61,83,038
2,88,04,886
Debtors
3,05,07,099
7,38,34,741
4,33,27,642
Cash & Bank
1,36,32,956
1,96,45,331
60,12,375
Loans & Advances
1,22,66,919
86,96,231
22,37,85,126
29,83,59,341
Liabilities
11,31,72,270
17,52,51,286
6,27,30,897
Provisions
57,07,608
88,16,724
31,09,116
(B)
11,88,79,878
18,40,68,010
Net Working Capital(AB)
10,49,05,248
11,42,91,331
Gross Working
Capital(A)
Decrease
35,70,688

Page 33
Particulars
Years
Change in Working Capital
Current Assets:
2011
Inventories
2012
Increase
19,61,83,038
25,53,52,991
5,91,69,953
Debtors
7,38,34,741
11,38,07,274
3,99,72,533
Cash & Bank
1,96,45,331
1,21,04,763
86,96,231
1,43,24,302
29,83,59,340
39,55,89,430
Short term
Borrowings
9,37,63,399
12,89,30,694
3,51,76,295
Trade payables
7,33,56,499
8,42,12,763
1,08,56,264
Other Current
Liabilities
7,79,48,196
10,57,11,460
2,77,63,264
88,54,404
97,63,891
9,09,487
25,39,22,498
32,85,28,808
2,54,23,414
6,70,60,621
Loans & Advances

Gross Working
Capital(A)
Decrease
75,40,568
1,34,28,071
Short term Provisions

(B)
Net Working
Capital(A-B)

Particulars
Years
Change in
Working
Page 34

Capital
Current Assets:
2012
2013
Increase
Decrease
Inventories
25,53,52,991
23,92,84,022
Debtors
11,38,07,374
12,21,14,993
Cash & Bank
1,21,04,763
1,09,31,446
Loans & Advances
1,43,24,302
1,76,08,339
39,55,89,430
38,99,38,800
12,89,30,694
17,71,06,940
Trade payables
8,76,52,782
8,49,20,873
27,31,909
Other Current
Liabilities
10,56,43,769
6,40,58,551
4,15,85,218
63,01,564
81,61,506
32,85,28,809
33,42,47,870
6,70,60,621
5,56,90,930
Gross Working
Capital(A)
1,60,68,969
83,07,619
11,73,317
32,84,037
Short term
Borrowings
Short term Provisions

(B)
Net Working
Capital(A-B)
4,81,76,246
18,59,942
GRAPH SHOWING FLUCTUATIONS IN WORKING CAPITAL
Page 35

YEAR
WORKING CAPITAL
2009
7,94,66,774
2010
10,49,05,248
2011
11,42,91,331
2012
6,70,60,621
2013
5,56,90,930
Working Capital
140000000
120000000
100000000
Working Capital
80000000
60000000
40000000
20000000
0
2009
2010
2011
2012
2013
INTERPRETATION
The above table and graph shows the working capital of last five years, here we can see that from
2009 to 2011 Working Capital is in increasing order & from 2012 it is in decreasing order.
RATIO ANALYSIS
Page 36

MEANING
Ratio is the numerical relationship between two numbers. It may be expressed in quotients, rate
or in percentage. The ratio analysis of working capital helps management in checking upon the
efficiency with which working capital has been used in company.
Ratio analysis is widely used tool of financial analysis. It is defined as the systematic use of
ratios to interpret financial statement so that the strengths and weaknesses of the firm, as its
historical performance and current financial conditions can be determined.
Ratios make related information comparable. A single figure by itself by itself has no meaning.
But when expressed in terms of the related figure, it yields sufficient inferences. Thus ratios are
relative figures reflecting the relationship between related variables. They are used as tools of
financial analysis, which involve their comparison as single ratios which like absolute figures are
not used.
IMPORTANCE OF RATIO ANALYSIS
The following are the importance of ratio analysis
1. Useful in financial position analysis.
2. Useful in simplification accounting purpose.
3. Useful in assessing purpose.
4. Useful in comparison of performance.
5. Useful in forecasting purpose.
Page 37

RATIOS
CURRENT RATIO
This is most widely used ratio to know the capital position. These ratios
express the relationship between current assets and current liabilities and give the information
about firm ability to meet short term and long term working capital.
Current Ratio = Current Assets
Current Liabilities
Particulars/Years
Current Assets
Current Liabilities
Current Ratio
2009-10
22,37,85,126
11,88,79,878
1.88
2010-11
29,83,59,341
18,40,68,010
1.62
2011-12
39,65,89,430
32,85,28,808
1.20
2012-13
38,99,38,800
33,42,47,870
1.16
CURRENT RATIOS
2
1.8
1.6
1.4
1.2
CURRENT RATIOS
1
0.8
0.6
0.4
0.2
0
2009-10
2010-11
2011-12
2012-13
INTERPRETATION
This ratio shows the capital position of company to meet short term & long
term working capital, current ratio is decreasing from 2010 till 2013.
Page 38
ABSOLUTE LIQUID RATIO

It considers only the absolute liquidity available with the firm means as early as possible
how company will get its cash ready in its hand. Here only cash, bank balance, marketable
securities are taken into consideration. The ideal ratio is 1:2
Absolute Ratio = Cash + Bank Balance + Short Term Marketable Securities
Current Liabilities
Particulars/Years
Cash & Bank
Current Liabilities
Current Ratio
2009-10
1,36,32,856
11,88,79,878
0.11
2010-11
1,96,45,331
18,40,68,010
0.10
2011-12
1,31,04,764
10,57,11,460
0.12
2012-13
1,09,31,446
33,42,47,870
0.03
Absolute Ratio
0.14
0.12
0.1
0.08
Absolute Ratio
0.06
0.04
0.02
0
2009-10
2010-11
2011-12
2012-13
INTERPRETATION
Page 39

This Ratio indicates that the company had high absolute liquidity ratio in 2011-12 when
compared with low absolute liquidity ratio in 2012-13 period.
WORKING CAPITAL TO TURNOVER RATIO
This ratio shows the number of times the working capital is turned over within a stated
period. It is calculated as follows:
Working Capital Ratio =
Sales
Net Working Capital
Particulars/Years
2009-10
2010-11
2011-12
2012-13
Sales
17,63,73,995
24,36,43,470
24,91,77,796
38,43,31,995
Net Working
Capital
Ratio
10,49,05,248
11,42,91,331
6,80,60,622
5,56,90,930
1.68
2.13
3.66
6.90
Ratios
8
7
6
5
Ratios
4
3
2
1
0
2009-10
2010-11
2011-12
2012-13
INTERPRETATION
Page 40

This Ratio shows that the company had very high turnover ratio of 6.90 of working capital in
2012-13 period.
WORKING CAPITAL TO PROFIT

This ratio shows the relationship between working capital and the profit of the company.
Working Capital to Profit =
Profit
Net Working Capital
Particulars/Years
2009-10
2010-11
2011-12
2012-13
Profit
58,42,534
78,30,116
68,76,506
1,00,64,656
Net Working
Capital
Ratio
10,49,05,248
11,42,91,331
6,80,60,621
5,56,90,930
0.04
0.06
0.10
0.18
Ratios
0.2
0.18
0.16
0.14
0.12
Ratios
0.1
0.08
0.06
0.04
0.02
0
2009-10
2010-11
2011-12
2012-13
Page 41

INTERPRETATION
This Ratio indicates that the company had increased ratio of 0.18 in 2012-13 and high profit of
R.s. 1,00,64,656.
FIXED ASSET TURNOVER RATIO

This ratio measures the efficiency of the assets used. The efficient use of the assets will
generate sales. The inefficient use of assets will result in low sales volume coupled with higher
overhead charge and under utilization of the capacity.
Fixed Asset Turn Over Ratio =
Sales
Fixed Assets
Particulars/Years
Sales
Fixed Assets
Ratio
2009-10
17,63,73,995
5,16,56,793
3.41
2010-11
24,36,43,470
5,32,42,884
4.57
2011-12
24,91,77,796
4,49,63,043
5.54
2012-13
38,43,31,995
9,96,90,586
3.85
Fixed Asset Turnover Ratio

6
5
4
Fixed Asset Turnover Ratio
3
2
1
0
2009-10
2010-11
2011-12
2012-13
Page 42

INTERPRETATION
This Ratio shows that 2011-12 had high ratio of 5.54 compared to low ratio of 3.85 in 201213.So the company had not utilized its assets efficiently in 2012-13.
CASH RATIO
It is the ratio of cash equivalent balance to current liability. It will help the company to
know the cash availability in the company. Company will come to know about, whether money
is blocked or fully utilized in production process. It is calculated as follows:
Cash Ratio =
Cash
Current Liabilities
Particulars/Years
Cash
Current Liabilities
Ratio
2009-10
1,36,32,956
11,88,79,878
0.11
2010-11
1,96,45,331
18,40,68,010
0.10
2011-12
2,20,98,306
10,57,11,460
0.20
2012-13
2,58,69,550
33,42,47,870
0.07
Cash Ratio
0.25
0.2
0.15
Cash Ratio
0.1
0.05
0
2009-10
2010-11
2011-12
2012-13
Page 43

INTERPRETATION
This Ratio shows that company had high ratio of cash in 2011-12 at 0.20 & 2012-13 had lower
ratio than other previous years at 0.07.
CURRENT ASSET RATIO

The current asset ratio measures the efficient use of current assets in the production. If the
company utilizes its current assets effectively production and sales will increase, if inefficiently
then production and sales will reduce.
Current Asset Ratio =
Sales
Current Assets
Particulars/Years
Sales
Current Assets
Ratio
2009-10
17,63,73,995
22,37,85,126
0.78
2010-11
24,36,43,470
29,83,59,341
0.81
2011-12
24,91,77,796
39,65,89,430
0.62
2012-13
38,43,31,995
38,99,38,800
0.98
Current Asset Ratio

1.2
1
0.8
Current Asset Ratio
0.6
0.4
0.2
0
2009-10
2010-11
2011-12
2012-13
Page 44
INTERPRETATION
This Ratio indicates that company used its current assets efficiently in production which resulted
in more production & sales. The Ratio was increased from 0.62 in 2011-12 to 0.98 in 2012-13.
COMPOSITON OF WORKING CAPITAL

For a proper appreciation and understanding of it, closer look of working capital is
necessary. The following are the constituent parks of working capital.
Current Assets
1. Cash
2. Bank Balance
3. Stock of Inventory
4. Debtors
5. Bills Receivables
6. Prepaid Expenses
7. Outstanding Incomes
Current Liabilities
1. Bills Payable
2. Creditors
Page 45

3. Outstanding Expenses
4. Incomes Received in Advance
5. Short term Loans
6. Bank Loans
PRINCIPLES OF WORKING CAPITAL

There are totally three principles which are given below,
1. Matching or Moderate Approach
2. Aggressive Approach
3. Conservative Approach
1. MATCHING APPROACH
In this approach long term financing to finance fixed assets and permanent
current assets. Short term financing to finance temporary or variable current assets.
2. AGGRESSIVE APPROACH
An aggressive policy is said to be followed by the firm when it used more short
term finance. Under this policy the firm finances a part of its permanent current assets with short
term financing
3. CONSERVATIVE APPROACH
Page 46

The financing policy of the firm is said to be conservative when it depends more
on long term funds. Under a conservative plan the firm finances its permanent assets and also a
part of temporary current assets with long term financing.
THE PRINCIPLE ADOPTED BY BEMCO HYDRAULICS Ltd.

The company adopted AGGRESSIVE PRINCIPLE because it is using short term bank
loans to finance the working capital. Mainly the company is getting loan from two banks. They
are:
Bank of Maharashtra
State Bank of India
In both the banks the company has three types of accounts:
1.Current Account
These accounts are mainly used by businessmen. These are very helpful to business
organizations because these deposits are more liquid deposits. BEMCO also has its
current accounts in the above mentioned banks and getting the following benefits:
Most liquid deposits
No limits for the number of transactions
No limits for the amount of transactions in a day
Cheque book facility is provided
2.Bank Guarantee Account
Bank guarantee is the guarantee of payment by bank on behalf of customer of the
bank; customer may be individual or a company. BEMCO also has its bank guarantee
account in SBI and Bank of Maharashtra and getting below mentioned benefits Bank guarantee can mitigate risk
Page 47
It functions as a safeguard for both parties

It is used to strengthen and secure an obligation under a commercial contract.
3.Letter of Credit
Letter of credit is a binding document that a buyer can request from his bank in
order to guarantee that the payment of goods will be transferred to the seller. Basically a letter of
credit gives the seller reassurance that he will receive the payment for the goods sold.
BEMCO also has Letter of Credit facility from its bank. After a contract is
concluded between buyer and seller, buyers bank supplies a letter of credit to seller. So the short
term loan is the main and only source for financing the working capital in BEMCO.
CALCULATION OF COST OF WORKING CAPITAL
Cost of working capital is nothing but the carrying cost of that working capital means
how much cost the company incurrs to hold the working capital.
It can be calculated by calculating the interest amount of loan taken by the company, the
cost of working capital of BEMCO Hydraulics is as follows:
YEAR
RATE OF
INTEREST
1,45,13,798
12.8%
1,22,66,919
12.8%
86,96,231
12.8%
1,43,42,302
12.8%
1,76,08,339
12.8%
TOTAL COST OF WORKING CAPITAL
2009
2010
2011
2012
2013
LOAN AMOUNT
INTEREST
AMOUNT
18,57,766.14
15,70,165.63
11,13,117.56
1,83,58,146.56
22,53,867.39
2,51,53,063.28
The above table shows the cost of working capital of the company. BEMCO Hydraulics Limited
invests its working capital by taking loan from banks so the interest amount will be the cost of
working capital of the company. The company usually gets loan from two banks,those are:
State Bank of India

Bank of Maharashtra
Page 48

By observing the above table we can say that for the past five years the cost of working capital of
the company is 2,51,53,063.28.
In every company working capital is needed and similarly the cost of working capital also
incurrs to hold that capital.
SALES,PROFIT AND WORKING CAPITAL OF THE COMPANY

Every company comes into existence to make profits. Making profits and acquiring most
of the capital share are the main objectives of every company. The below table and graph shows
the sales, profit and working capital of the company of the past five years.
Particulars
2009
2010
2011
2012
2013
Sales
22,50,48,379
17,63,73,995
24,36,43,470
24,91,77,796
38,43,31,995
Profit
33,22,462
58,42,534
78,30,116
68,76,506
1,00,64,656
Working
Capital
7,94,66,774
10,49,05,248
11,42,91,331
6,70,60,621
5,59,60,930
Page 49

500000000
450000000
400000000
350000000
300000000
WORKING CAPITAL
250000000
PROFIT
200000000
SALES
150000000
100000000
50000000
0
2009
2010
2011
2012
2013
INTERPRETATION
This Ratio shows that the companys Sales & Profit is increasing year by year and working
capital had increased from 2009 to 2011 but it is decreasing from 2012 and 2013
CHAPTER VI
FINDINGS, SUGGESIONS AND CONCLUSION
FINDINGS
1. Company has adopted the aggressive principle to maintain the working capital.
2. The main and only source for financing working capital is Bank Loan.
3. Bank of Maharashtra and SBI are the banks which provides loan to the company.
Page 50

4. Though current ratio is not upto the mark, but in five years it never went less than 1.17
which can be considered as good.
5. There is increase in profit and sales
6. Company is growing step by step.
7. By studying the financial growth the statements I found that the companys financial
position will be sound in the coming years.
SUGGESTIONS
1. It is good for the company to move with aggressive principle only, because it is suitable
and benefited to the company.
2. In addition to Bank loan I would like to suggest the following internal sources of
finance for the working capital, because it will result in reduction of cost of working capital that
is 2,51,53,063.28 for past five years.
Cash in hand
Debtors
Page 51

3. Company prefers Bank of Maharashtra and SBI for loan, they can go for other banks
also which will provide loan at less interest.
4. I would also like to suggest company to improve its working capital position by
reducing its current liabilities like paying the creditors as early as possible.
5. Since company is growing I would like to suggest that it can open its branches in other
cities also that it can spread its operations which will help the company to achieve its vision.
6. Investment in current assets should be increased
CONCLUSION
Working capital may be regarded as life blood of a business. Its effective provision can
do much to ensure the success of a business, while its inefficient management can lead not only
to loss of profits but also to the ultimate downfall of what otherwise might be considered as a
promising concern. A study of working capital is of major importance to internal and external
analysis because of its close relationship with the current day to day operations of business.
BEMCO Hydraulics is a private limited company. It is in the field of Hydraulic presses
and equipments, since 1957 and having good sales record. It indicates the managements
effectiveness and efficiency.
Page 52

There is a small fluctuation in the companys working capital, sales and profit in these 5
years. By observing the data we can say that company is improving year by year. Though the
company does not have highly qualified employees, they are contributing their skills and
knowledge so effectively that their own employees tell that they have become expert than highly
qualified employees.
The companys financial position will be strong in the coming years. Companys
working capital position is good. The liquidity position of the company is also good.
One important thing is that bank of Maharashtra and SBI are providing loans since so
many years so that the relationship between the company and these two banks is good.
BIBLIOGRAPHY
Books:
1. Financial Management by Khan and Jain
2. Financial Management by I.M.Pandey
Company:
Annual Report
Page 53
Balance Sheet
Profit and Loss Statement
Website:
1. http://www.bemcohydraulics.net/index.php?
option=com_content&view=article&id=1&Itemid=2
6. http://www.bemcohydraulics.net/download/52.pdf
Page 54

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Bemco Hydraulics Ltd.

Bemco Hydraulics Ltd.,Belgaum

NEED FOR THE STUDY

OBJECTIVES OF THE STUDY

1. To know the sources for financing working capital

SCOPE OF THE STUDY

Bemco Hydraulics Ltd.,Belgaum

Balance Sheet of the company

A.S.S College Of Business Administration,Gadag

Bemco Hydraulics Ltd.,Belgaum

Bemco Hydraulics Ltd.,Belgaum

LIMITATIONS OF THE STUDY

Bemco Hydraulics Ltd.,Belgaum

Bemco Hydraulics Ltd.,Belgaum

:Bemco Hydraulics Limited Belgaum

Size and Nature of the

:Medium scale,Public Limited company

Total area build-up

: Originally incorporated on 04/03/1957 as Private Limited and

subsequently incorporated on 19 /04/1972 as Public Ltd

: Registered with DGTD on 15/12/1973

: Manufacturing and selling of Hydraulic Presses and equipments

A.S.S College Of Business Administration,Gadag

Bemco Hydraulics Ltd.,Belgaum

BACKGROUND AND INCEPTION OF THE COMPANY

First Hydraulic Press Ever Developed in 1957;

A.S.S College Of Business Administration,Gadag

Bemco Hydraulics Ltd.,Belgaum

NATURE OF BUSINESS CARRIED

Throat type hydraulic presses.

A.S.S College Of Business Administration,Gadag

Bemco Hydraulics Ltd.,Belgaum

Mounding, Straightening and bending presses.

VISION,MISSION AND QUALITY POLICY

A.S.S College Of Business Administration,Gadag

Bemco Hydraulics Ltd.,Belgaum

Bemco Hydraulics Ltd.,Belgaum

SHEET METAL FORMING PRESSES

Bemco Hydraulics Ltd.,Belgaum

TVS Motors Ltd.

HEAVY ENGINEERING & ELECTRICALS

Bharat Heavy Electrical Ltd

Hindustan Aeronautics Ltd

With its registered office/Head office at

Bemco Hydraulics Ltd.,Belgaum

BEMCO PRODUCTS ARE EXPORTED TO

A.S.S College Of Business Administration,Gadag

Bemco Hydraulics Ltd.,Belgaum

1. Bank of Maharashtra, Main Branch, Kirloskar, Belgaum.

A.S.S College Of Business Administration,Gadag

Bemco Hydraulics Ltd.,Belgaum

A.S.S College Of Business Administration,Gadag

Bemco Hydraulics Ltd.,Belgaum

A.S.S College Of Business Administration,Gadag

Bemco Hydraulics Ltd.,Belgaum

FUTURE GROWTH AND PROSPECTS

Bemco Hydraulics Ltd.,Belgaum

Axial piston pumps

SPECIAL FEATURES OF THE BANK

Bemco Hydraulics Ltd.,Belgaum

SWOT Analysis of the company

Bemco Hydraulics Ltd.,Belgaum

A.S.S College Of Business Administration,Gadag

Bemco Hydraulics Ltd.,Belgaum